- 91 -
our subsequent discussion of the effect of Example (4) of the
regulations under section 901(i), infra pp. 93-95.
It cannot be gainsaid that exploitation of mineral reserves
is a significant governmental function. Such being the case and
applying the analysis and results of the foregoing cases, we are
satisfied that EGPC should be included within the meaning of the
term "foreign country" under section 1.901-2(e)(3)(ii) and
(g)(2), Income Tax Regs., and Example (3), supra at 80.
We are still left with the question whether Example (3),
supra, applies to the instant situation so as to justify the
conclusion that the credits taken by EGPC did not constitute an
indirect subsidy to Amoco Egypt. The parties have devoted
considerable attention to the issue whether the application of
Example (3) effectively eliminates the payment requirement.
Petitioner argues that Example (3) substitutes a "considered
paid" standard making the actual transfer of funds irrelevant.
Respondent counters with the argument that such a "considered
paid" construction would emasculate the implementation of foreign
tax credit provisions and consequently should not be adopted.
The parties have also parted company on whether a conclusion that
Article IV(f)(6) did not authorize EGPC to take a credit for the
Egyptian income taxes of Amoco Egypt is determinative of the
availability of the foreign tax credit claimed herein.
Petitioner urges that it should not be subjected to the loss of
the foreign tax credit for such taxes because of EGPC's
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